Latin America’s total refined product demand will increase by 90,000 b/d next year to 9.2 million b/d after falling by an average of 80,000 b/d each of the last three years. Much of the demand change stems from one-time events that happened this year and won’t recur, such as a surge in hydrous ethanol consumption in Brazil and a steep drop in Argentina’s fuel oil use.

The E.P.A. will begin the process of allowing sales of E-15 gasoline year-round. Although the waiver will increase ethanol more significantly in the long term, short term demand impacts will be limited by investment requirements and consumer preferences. As a result, ESAI Energy forecasts a high of just 60,000 b/d of additional E-15 sales by 2020, or just 10,000 b/d of additional ethanol blending.

China’s September crude imports remained unchanged from August at 9 million b/d. In the fourth quarter, ESAI Energy estimates that China’s throughput could boost crude imports by at least 150,000 b/d, based on analysis of refining capacity increases, maintenance, and seasonal utilization. Meanwhile, China’s new product export quotas suggest that gasoline and diesel exports between September and December would both fall by 60,000 b/d, compared to January-August levels.

Delays at Rosneft projects mean Russia will add less hydrocracking capacity by the time new IMO regulations take effect than previously thought possible, according to newly updated information. Still, diesel output will increase by a little over 100,000 b/d, albeit mostly at the expense of VGO exports.

The presumed execution of Saudi Journalist Jamal Khashoggi at the Saudi consulate in Turkey has seriously rattled U.S.- Saudi relations and led to the discussion of sanctions in the U.S. Congress. Even so, the complex relationship between the two countries, and especially the joint effort to contain and weaken Iran, tilt against a significant economic response from the Trump Administration.

Even with total European road fuel demand growth slowing this year, gasoline consumption growth is accelerating and slated to rise by over 50,000 b/d. As gasoline-powered passenger vehicles continue to replace diesel-powered vehicles’ market share, gasoline will make up an increasing portion of total road fuel demand going forward.

We know from field-level production data that producers could unleash production from new fields. The only question is – how much, how soon? The loss of Iranian exports presents the opportunity for higher output. Production could increase from from 11.3 million b/d in September to at least 11.8 million b/d in 2020, and feasibly as high as 12.1 million b/d.

The E.P.A. will begin the process of allowing sales of E-15 gasoline year-round. Although the waiver will increase ethanol more significantly in the long term, short term demand impacts will be limited by investment requirements and consumer preferences. As a result, ESAI Energy forecasts a high of just 60,000 b/d of additional E-15 sales by 2020, or just 10,000 b/d of additional ethanol blending.

From the end of 2018 to early 2019, three refining projects will start operations, adding total crude distillation capacity of 900,000 b/d. ESAI Energy estimates that the resulting increase in refined product output in 2019 will be 140,000 b/d for gasoline, 30,000 b/d for diesel, and 80,000 b/d for jet. This relatively modest growth is due to the petrochemical focus of the new projects as well as lower utilization rates of some other refiners facing tough competition.

Increasing subsidies will not fully offset higher fuel prices in most Asian countries in 2019, and weaker currencies and slower economic growth will not help. Transportation fuel demand growth outside of China will decelerate to 300,000 b/d in 2019, after growing by 340,000 b/d in 2018. In China, demand will return to modest growth next year after collapsing in 2018.

Over the last several years we have written about the growing imbalance between U.S. and Chinese dependence on the Persian Gulf for oil. Chinese oil demand growth and U.S. oil supply growth have shifted the importance of the region for both importers. A significant and lengthy disruption in the Persian Gulf could still impact all oil consumers through the price mechanism, but the U.S. economy is now far more insulated from energy disruptions than the Chinese economy. Not surprisingly, China’s naval capabilities have grown considerably to address this vulnerability to the flow of oil and other goods

Three of Africa’s biggest OPEC producing countries – Nigeria, Angola, and Libya – will increase their productive capacity by 500,000 b/d in the next six to twelve months. But we expect violence, strikes, and natural decline rates to limit total actual production increases from these three countries to only 75,000 b/d in 2019. Africa’s total production should increase by 150,000 b/d next year to 7.4 million b/d.

Three of Africa’s biggest OPEC producing countries – Nigeria, Angola, and Libya – will increase their productive capacity by 500,000 b/d in the next six to twelve months. But we expect violence, strikes, and natural decline rates to limit total actual production increases from these three countries to only 75,000 b/d in 2019. Africa’s total production should increase by 150,000 b/d next year to 7.4 million b/d.

After averaging 2.7 million b/d in 2017 and the first three quarters of this year, North Sea crude and condensate production will remain more or less steady through 2019 as U.K. output growth continues to offset declines in Norway and Denmark. However, the late-2019 startup of the Johan Sverdrup mega-project will return the North Sea to production growth in 2020.

Higher non-OPEC production will reduce the call on OPEC in the fourth quarter of 2018 and in 2019. With the potential restart of Saudi-Kuwaiti neutral zone production and incremental output gains in Iraq, Kuwait, and the UAE, we believe OPEC would be able to produce enough crude to meet global demand, despite plummeting output in Iran and Venezuela.